Jack in the Box 4Q profit up but outlook weak

Fast-food chain Jack in the Box Inc. said Wednesday that its fourth-quarter profit rose nearly 51 percent as lower food, payroll and administrative costs offset a 7 percent drop in sales. However, a weak forecast for fiscal 2010 sent shares tumbling 6 percent in after-hours trading.

Earnings for the three months ended Sept. 27 totaled $40.6 million, or 70 cents per share, compared with $26.9 million, or 47 cents a share, a year ago.

Revenue in the quarter fell to $540.3 million from $582.7 million in the year-ago period. Same-store sales _ a key measure of a retailer's health because it measures sales at stores open at least a year _ at Jack in the Box company restaurants fell 6 percent in the fiscal fourth quarter.

The earnings results easily topped analysts' average estimate of 55 cents per share, though sales came in shy of their $549.5 million forecast, according to a Thomson Reuters poll.

The company said food and packaging costs both declined year-over-year, with prices for beef and cheese dropping 17 percent and 31 percent respectively. Gains on the sale of 96 company-operated Jack in the Box restaurants to franchisees totaled $34.3 million.

"Refranchising is a critical element in transforming the company to a business model that is less capital intensive and not as susceptible to cost fluctuations," said Chairman and CEO Linda A. Lang in a statement. "The company remains on track to achieve its long-term goal to increase the percentage of franchise ownership in the Jack in the Box system to 70 to 80 percent by the end of fiscal year 2013."

The company also completed the sale of its 61 Quick Stuff convenience stores during the fourth quarter.

Jack in the Box has been aggressively promoting value-priced offerings amid the recession, competing with other fast-food rivals that offer popular dollar menus. But looking ahead, the company expects same-store sales to drop roughly 10 percent at Jack in the Box company restaurants in the first quarter, versus a 1.7 percent increase in the year-ago period. It also forecast fiscal 2010 earnings per share of $1.90 to $2.10 _ well below analysts' $2.31 per share estimate.

Shares fell $1.18 to $18.80 in aftermarket trading, having closed earlier down 26 cents at $20.03.